German automakers are losing their competitive edge in the transition to electric vehicles.

Germany built its reputation on the internal combustion engine. However, the global shift toward electric vehicles (EVs) has caught German carmakers off guard. Software has become the new battleground for modern cars, an area where German manufacturers traditionally struggle compared to tech-focused rivals in China and the United States. Chinese car brands are now producing high-quality, software-rich electric cars at a fraction of the cost of German models. This has not only hurt German exports to China—historically their most lucrative market—but has also allowed foreign competitors to start taking market share inside Europe itself.